City, State Proposing Nearly $5.7 Million in Incentives to Lure 600-plus Tech Jobs to Austin

The city projects a net fiscal benefit to Austin of $1.67 million from the incentives package.

by SHONDA NOVAK, MCCLATCHY NEWS SERVICE
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January 17, 2014

State and city officials have proposed more than $5.6 million in incentives to persuade a Massachusetts-based tech company to bring a research and development center — and more than 600 jobs — to downtown Austin.

The incentives would go to Athenahealth Inc., a fast-growing provider of cloud-based health information technology services, in exchange for the company locating its new facility at the site of the former Seaholm Power Plant building on West Cesar Chavez Street and creating 607 new full-time jobs in Austin by the end of 2023.

The new jobs created in Austin by Athenahealth would have an average salary of $132,085 a year, according to documents filed with the city. The deal would require Athenahealth to pay all employees a minimum of $11 per hour.

The incentives being offered to Athenahealth include $5 million through the Texas Enterprise Fund, Gov. Rick Perry’s office said Wednesday. Those incentives would be contingent on Athenahealth making $13 million in capital investments as its Austin presence grows.

The state’s investment, Perry said, “will create hundreds of high-paying tech jobs in Austin, building on the city’s thriving technology sector and strengthening the state and local economies.”

By state law, a local incentives package must be approved before Texas Enterprise Fund incentives can be deployed. The city of Austin is proposing an incentives package that would total $679,500 over 10 years.

To qualify for the city’s incentives, Athenahealth would have to hit annual job creation and investment milestones. That begins with 35 new full-time jobs by the end of this year, reaching 100 new full-time jobs by the end of 2016, and rising to 607 new full-time jobs by the end of 2023. Athenahealth also would have to reach a local capital investment of $7.75 million by the end of 2023.

The city projects a net fiscal benefit to Austin of $1.67 million from the incentives package.

The City Council will be briefed on the incentives proposal at its Jan. 23 meeting, with a vote scheduled for Jan. 30.

“This will be an important addition to our economy, bringing hundreds of new jobs to Austin if approved by the (City) Council,” Mayor Lee Leffingwell said.

Founded in 1997, publicly traded Athenahealth has 2,853 employees, and it reported revenue of $422.3 million in 2012. The company — headquartered in Watertown, Mass. — already has an Austin presence, with 36 employees at the Domain.

“We’re pleased that Athenahealth is considering an expansion in the Seaholm District,” said Kevin Johns, director of the city’s Economic Development Department, noting that the company “would serve as a great return on investment” at Seaholm, which is being transformed into a mixed-use project.

Jonathan Bush, Athenahealth’s chairman and CEO, said the company was “thrilled at the prospect of growing our presence in Austin, a city with a culture and vibe that perfectly aligns with our own.”

“Athenahealth is growing all across the country as we work to fulfill our vision of becoming a national information backbone to make health care work as it should,” Bush said in a written statement. “Austin offers a strong talent pool to aid in the important work we do at Athenahealth to advance connectivity in health care.”

If the company were to expand at Seaholm, it would be a boon for the $100 million redevelopment of the 7.8-acre site on West Cesar Chavez Street, which is being transformed into a mix of housing, offices, restaurants and retailers, including downtown’s first Trader Joe’s grocery store. The redevelopment is expected add millions of dollars to the city’s tax base over coming decades.

The City Council in 2005 selected a team led by John Rosato of Austin-based Southwest Strategies Group to partner with the city in transforming the Seaholm site.

“We are excited about the prospect of having Athenahealth select Austin and the Seaholm Power Plant for its expansion, and hope the City Council acts favorably towards the incentive request,” Rosato said. “We also greatly appreciate the governor’s Enterprise Fund grant offer, which is contingent on the local incentive.”

Fred Evins, the city’s project manager for Seaholm, said construction is underway inside the 117,000-square-foot structure on “core building functions” such as elevators, stairs, restrooms, as well as on mechanical, plumbing and electrical work.

Evins said the space won’t be fully finished out until a tenant has signed a lease, “so the space can be tailored to their needs.”

Also under construction at Seaholm is a 538-car underground parking garage that will serve as the base of both a 30-story condo tower and a low-rise retail building. The condo tower will have 280 luxury residences, all of which were reserved within a week, a record for a downtown condo project.

The city is making a $13.6 million investment in street extensions and improvements, a public plaza and the main Seaholm building. The city will capture property and sales tax generated from Seaholm’s redevelopment to pay off the debt for its share of the investment.